Buffalo News: Manufacturing a turnaround

Sun, Jun 21st 2015 04:00 pm

Friday June 26, 2015

The Buffalo News.com

Business

Plenty of available space remains inside the former American Axle plant on East Delavan Avenue in Buffalo. Among the current tenants is plant owner Ontario Specialty Contracting, which makes and maintains construction equipment, including specialized pins and other parts made of steel. Other tenants have found that space in the plant has allowed them to diversify their businesses. (Mark Mulville/Buffalo News)

Manufacturing a turnaround: Former American Axle plant on East Side finds a new direction

When American Axle & Manufacturing shut its East Side plant more than seven years ago, the outlook was bleak.

The plant had operated, under different identities, in the Delavan-Grider neighborhood for about 85 years. Good jobs vanished with the closing. And with American Axle gone, who would need a manufacturing complex with more than 1 million square feet?

The answer came from more than one source, and the outcome showed how a sprawling complex can be reinvented instead of falling into disrepair.

The transformation is still underway. But the property's owner, Ontario Specialty Contracting, feels confident about filling the rest of the industrial space, and has a unique idea for reviving the administrative offices.

The property along East Delavan Avenue has a rich history in local manufacturing. It started out as a Chevrolet vehicle assembly plant in 1923, and converted to producing parts for aircraft engines during World War II. After the war, the plant switched to making automotive components.

By the mid-1990s, the General Motors plant was starved for investment and its prospects were dim. Detroit-based American Axle acquired the factory and poured in investment, bringing a sense of stability.

More than a decade later, American Axle opted to close the plant following a dispute with the United Auto Workers over costs. The company chose to transfer new work for the Chevy Camaro to Mexico, leaving the Buffalo plant without a future.

In his book, "American Drive," American Axle's co-founder, Richard Dauch, said: "It was a tough decision we did not make lightly, but it was a matter of survival. Life presents us with difficult choices."

American Axle idled the plant in 2007 and officially closed it in 2008. (American Axle ended up shutting its two other area facilities, in the Town of Tonawanda and Cheektowaga, as the company exited the region.)

A new vision

While observers wondered what would become of the East Side complex, OSC stepped in and bought it for $1.5 million. Jon M. Williams, the CEO, imagined attracting multiple tenants.

"If you could see the buildings for what they could be, they're spectacular," Williams said. "They're industrially constructed and designed. Nice, wide bays, high ceilings, heavy concrete floors. Lots of power distribution and infrastructure."

OSC would spend about two years cleaning up the property and removing decades' worth of grime, and demolishing unusable parts of the complex.

"It was interesting," Williams said. "We knew what we had in the drawings, but the drawings didn't quite reflect what you were getting into when you were in the field." Another task was converting the utilities, to make them accessible to individual buildings and tenants.

So far, three companies have had a presence at the former American Axle plant: Galvstar, an ambitious startup; Niagara Lubricant, which needed a new home after a calamity; and OSC, which saw potential to expand.

Galvstar arrived as a manufacturing tenant about three years ago. The company tried to establish a market in the United States and Canada for a specialty galvanized steel product but ended up shutting down last year.

"I think the challenges of creating a market for the product and being a startup manufacturer, you couldn't manage both," Williams said.

Galvstar's equipment is due to be removed from the plant by September. "I'm not happy that they're gone, but I'm glad that it's come to a close and we can start marketing the space," Williams said.

The south end of the plant consists of about 450,000 vacant square feet; Galvstar was using only a portion of that. Williams said he has received interest in the vacant space, and believes it will be filled by the end of next year.

Driven by fire

Niagara Lubricant came to the former American Axle complex under different circumstances from Galvstar.

The 92-year-old company makes and packages lubricating oils, greases, industrial oils and tire care products. Fire destroyed its Black Rock factory in 2011, but Niagara Lubricant was determined to survive and keep its workers employed, said vice president Leon Smith IV. The family-owned company moved to a temporary location on Northland Avenue as it searched for a permanent home, and also considered rebuilding at the fire-ravaged location.

Its search ended at American Axle's former paint shop, a standalone building on the property that was completed in 1995. Niagara Lubricant bought the building from OSC and moved in last year. The Erie County Industrial Development Agency supported the project with a $150,000 loan for equipment, and the agency connected Niagara Lubricant with the National Development Council, which provided a $2.1 million loan.

Smith said the new site has worked out "like a dream." The building allows for easy flow of traffic in and out. The loading docks can be closed off against harsh weather. For the workers, the building is warmer in the winter and cooler in the summer than what they were used to. "It's designed in a way that if we need to expand, we could do that," Smith said.

The new location was significant in another way for Niagara Lubricant's 32 permanent employees, Smith said. "It makes our employees feel they're secure and we're going to be around."

Expanding business

OSC is also tapping into the former American Axle plant's potential. While the company remains headquartered on Ganson Street along the Buffalo River, it moved its manufacturing and equipment services operations to the East Delavan complex. Williams declined to specify how much OSC has invested in the facility. But in an application for incentives filed with the ECIDA, the company outlined plans to invest $17.5 million to renovate a portion of the plant for its use. The ECIDA approved about $355,000 in incentives.

OSC was already in the business of leasing equipment, but since moving into the East Delavan site, it has added equipment sales. OSC also has more room to manufacture parts for construction equipment. When those parts break or wear out on a job site, OSC can produce and ship new pieces on short notice to customers, said Lenny Kostelnik, the general manager. About 30 OSC employees work at the East Delavan location.

An emerging part of OSC's plans for the East Delavan site is a "green machines" division, making mini-excavators that run on lithium-ion batteries to cut down on emissions and fuel costs. Williams said those plans are in development and he wasn't ready to talk in detail about them just yet.

Vocational plans

The front of the East Delavan complex features 320,000 square feet of unused office space. Images of workers making automotive parts at the plant still hang in the lobby, across from an empty receptionist's desk. The corridors are dark and dusty, with office furniture left behind here and there.

But just like the manufacturing space, Williams sees more than meets the eye. He envisions a vocational school opening in the office space, focusing on those students "not making it through the Buffalo public schools, but should have."

The idea is still in its infancy, but Williams said a few parties have shown interest in participating in the project.

Williams points out a window, to homes across East Delavan to homes with neatly trimmed lawns. He said the neighborhood has impressed him.

"I think what people don't understand is, you've got a neighborhood that is very invested in where they live and they care about their area, and take care of it and appreciate the neighbors," he said.

The little things stand out to Williams.

"The neighbors will regularly come to us and tell us, 'There was a couple of cars parked in the parking lot out front last night, and I wrote the plates down,' " he said.

Job creation

While OSC works to fill the rest of the vast complex, the project demonstrates how old industrial properties can find new purpose. A similar overhaul occurred in Depew, where Walden Development Group transformed the former home of Quad/Graphics, which vacated a massive printing plant several years ago. Multiple companies, including Howden North America, now operate in the George Urban Business Center.

Revitalizing closed plants can help rebuild the region's manufacturing job count, said Steve Weathers, ECIDA's president and CEO. "When you have industrial sites like Bethlehem Steel or others that haven't been used, it's tough to convert them to other uses other than that."

Weathers said he sees a "vibrant, growing industrial site, kind of strategically located within the heart of the region" at the former American Axle plant. "There's high-paying job creation. It's the kind of thing that I think our board here wants to see."

More redevelopment could be coming to that part of the city. An East Side business and park along Northland Avenue is taking shape a few blocks to the west of the plant, part of Gov. Andrew M. Cuomo's Buffalo Billion initiative. The city has acquired a series of properties, with the goal of attracting manufacturing operations and creating job opportunities for East Side residents.

Over at the former American Axle plant, the transformation continues. Williams likes what he sees so far. "I'm happy with where we are, and we have a long way to go."